Google stock holds its own / No surprises or dip as search engine's lock-up period ends

Verne Kopytoff, Chronicle Staff Writer

Published 4:00 am, Tuesday, February 15, 2005

Google's soaring stock withstood a major test Monday, rising modestly on the same day the door opened for insiders to sell 177 million shares, more than half of the company's outstanding stock.

Those insiders -- employees, management and early investors -- had been restricted from selling their stock under the rules of the firm's initial stock offering, which was held six months ago.

Wall Street had been concerned that the end of Google's so-called lock-up period would open the floodgates to insider selling and lead to a big drop in share price.

In fact, the shares escaped mostly untouched, in what turned out to be an unusually volatile day. Shares for the Mountain View search engine were down slightly at the opening bell but gradually climbed to close up $5.59 at $192. 99, an increase of nearly 3 percent.

Trading volume was 38.6 million shares, nearly four times the average of the past three months.

"There's been anxiety and a news flow of 'People are going to be selling, people are going to be selling,' " said Mark Mahaney, an analyst for American Technology Research.

The reality, he said, is that existing investors had sold their shares in anticipation of Monday's event. Google's shares have declined 12 percent since their high on Feb. 2. As such, a sell-off by insiders was already priced into the stock, he said.

In addition, analysts said early concerns were muted by Google's recent strong financial performance.

Lock-ups are a normal part of the IPO process. They protect investors who buy into an IPO by keeping insiders from quickly selling their shares and depressing the price.

Google's lock-up expiration was unusual in that it was staggered in five parts. The first, covering a relatively small number of shares, was lifted just 15 days after the company's IPO at $85 a share.

Monday's expiration came 180 days after the IPO. It was the last and biggest of the lock-ups, comprising 62 percent of all outstanding shares.

Many Google insiders can now sell all their holdings, rather than just a portion. Reports to federal regulators show that many had in fact cashed in some of their shares before Monday.

The sales ranged from as little as five shares by Google's rank-and- file to hundreds of thousands of shares by the company's co-founders, Larry Page and Sergey Brin.

Whether any Google insiders sold shares Monday wasn't immediately clear. A spokesman for the company declined to comment.